Porsche may pause some production amid supply shortage due to flooding

Porsche lowered its sales and profitability outlook after supplies of aluminum were disrupted due to heavy flooding.

Porsche said a shortage of aluminum alloy is affecting production of all its models and could lead to shutdowns for one or more vehicle series. The disruption is expected to last several weeks, the automaker said.

Porsche said it will be unable to fully compensate for delays in production and vehicle deliveries during the financial year.

Bernstein analysts said the disruption could lead to a production loss at Porsche of up to 17,400 vehicles in the second half. That figure is equivalent to over 11 percent of Porsche's first-half deliveries.

"Porsche will certainly be closely questioned over its cluster risk management that has left it so vulnerable to one critical supplier," Bernstein said.

Porsche did not name the aluminum alloy supplier.

Several European countries, including Switzerland, have experienced significant flooding in recent weeks.

'Force majeure event'

Novelis, an aluminum provider owned by India’s Hindalco Industries, said it declared a "force majeure event" after recent flooding at a plant in Sierre, Switzerland.

"With our plant shut down due to the flooding, our ability to fully deliver to our automotive customers in Europe has been impacted," the company said in an emailed statement.

Novelis supplies a joint venture co-owned by Porsche.

Aluminum parts maker Constellium said its facilities in Sierre and Chippis in Switzerland were impacted by exceptional flooding from the Rhone River. All operations are currently suspended.

"As cleaning operations have just started with the support of local authorities, at this point Constellium cannot assess the extent of the damage or determine when production will restart," the company said in a statement on July 23.

The supplier's customers include Porsche, Volkswagen, Stellantis, Mercedes-Benz, Ford and BMW, according to a regulatory filing.

Constellium said it did not supply Porsche from its facilities in Switzerland.

Norsk Hydro CEO Eivind Kallevik declined to comment when asked by Reuters whether the Norwegian aluminum producer could increase output to make up for the shortfall or was receiving enquiries from customers for more product.

All three companies name Porsche or companies affiliated to the automaker among their customers.

BMW, Mercedes, Audi impacted

The aluminum alloy shortage also impacted the supply chains of BMW and Mercedes, but both were able to find alternative suppliers. Spokespeople for BMW and Mercedes declined to give further details.

Audi said flooding had led to a shortage of special aluminum alloys at multiple suppliers, but that the shortfalls were not directly impacting production.

"We are in close contact with our suppliers and are working to avoid any supply bottlenecks,"an Audi spokesperson said.

Porsche revenue, profit warning

Porsche said on July 23 that it now expects sales between €39 billion and €40 billion ($43.56 billion) as a result of the disruption. It previously expected revenues between €40 billion and €42 billion.

The company sees a return on sales between 14 percent and 15 percent for the year, down from its previous expectation of 15 percent to 17 percent.

The production disruption is the latest in a string of challenges for Porsche.

The automaker is also struggling with low electric vehicle sales. It has lowered its EV ambitions, citing weaker-than-expected customer uptake.

Porsche also faces muted demand in China amid a slowing economy and lower luxury car sales as customers gravitate to cheaper, locally made EVs,

Porsche's global deliveries fell 7 percent in the first half, with sales in China down 33 percent.

The automaker has replaced its top executive in China.

Reuters and Bloomberg contributed to this report